Canadian Senate Scandal Highlights Needs for Strong Policies and Internal Controls

April 8, 2016

If you’ve been following the Canadian Senate scandal, you probably have an opinion on the matter. But if you can put the personalities aside and forget about the total cost of the audit to taxpayers ($23.6 million), you may find yourself asking, “Why were these expense irregularities not flagged sooner?”

The inkling of a problem first appeared in 2012 when the Auditor General of Canada released a performance audit of the Senate Administration and found a number of deficiencies, including that many expense claims did not provide sufficient documentation to determine their legitimacy.

While it’s easy to criticize those submitting the expenses, one of the issues may be that there were not enough documented internal controls and that there were significant deficiencies in policies. According to an article by Michael Harris in ipolitics.ca, while under cross-examination during Senator Mike Duffy’s trial, the law clerk of the Senate confirmed several key points:

  • Senator Duffy was largely operating within the Red Chamber’s rules;
  • The Senate does not provide definitions of what constitutes a primary or a secondary residence;
  • To become a senator, Mr. Duffy was obliged to designate his P.E.I. property as his primary residence, which the Prime Minister’s Office was aware of at the time of the Senator’s appointment;
  • There is no rule stipulating how much time a senator must spend in his provincial residence, and there is no prohibition against designating a cottage as a primary residence;
  • The Senate has no definition of partisan activities for senators and no documented limitations on such work aside from campaigning in a writ period or during a nomination; and
  • It is within the rules to combine private and family activities with public or partisan duties while travelling.

While these findings don’t necessarily indicate there were no wrongdoings, “the Senate gives us a great example of how stronger internal controls would have spared the taxpayers millions of dollars and politicians considerable drama and wasted time,” as Jamie Black of F.H. Black & Company noted in a recent post.

Auditors can easily test compliance with policies but if there are no policies, there can be no testing. In a strong internal control framework that is reviewed, evaluated and improved as required, appropriate policy statements have to be included.

Another important component in an effective control framework is monitoring. Continuous monitoring enables the ongoing verification of a control effectiveness and integrity of transactions. It reduces the likelihood of errors, fraud and abuse, and allows system inefficiencies to be identified quickly.

While stronger internal controls and continuous monitoring in the Senate will not restore all that has been lost with this scandal, moving forward it will allow the institution to operate with more transparency—and possibly more confidence. The same can be said for any other government body that is concerned that it needs tighter control of its expenses.

Looking to augment your audit process or implement a continuous monitoring process? Contact us

 

About Bob Cuthbertson:

Bob Cuthbertson brings a wealth of accounting, auditing and technology experience to his role as Chief Operating Officer at CaseWare Analytics. Prior to starting the analytics division of CaseWare in 2000, initially as CaseWare IDEA Inc., Mr. Cuthbertson was Vice President, Professional Services, of The Canadian Institute of Chartered Accountants (CICA). Mr. Cuthbertson is also a CPA (Ontario) with a specialty in Information Technology (CITP), granted by AICPA, and holds a Bachelor of Commerce degree from Queen’s University School of Business.

Connect:   Bob Cuthbertson

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